More overruns at Norwegian gas project

State-controlled oil company Statoil ASA announced new delays and cost overruns Sept. 16 on a key Arctic petroleum development, pushing the cost to 50 percent over the original budget.

The company said its Snoehvit offshore natural gas project in the Barents Sea would cost an extra 7 billion kroner (US$1.1 billion), bringing the total to 58.3 billion kroner (US$9.3 billion) after a series of cost overruns. The company also said the start of production would be delayed by another seven months, until June 2007.

“The Snoehvit project has struggled with problems from the outset, mainly because the project was not sufficiently mature when it was sanctioned in 2001,” said Statoil Chief Executive Helge Lund.

When the government approved the project in March 2002, the budget was 39.5 billion kroner (US$6.3 billion). “It is very unfortunate that the costs from the Snoehvit development increase, and that the project is delayed,” said Oil Minister Thorhild Widvey. “I expect Statoil will do what is necessary to keep the cost development and the further progress under control.” Statoil said it was restructuring the management and organization of the project in the waters off northern Norway.

The project includes the development of an Arctic offshore natural gas field, a pipeline, an onshore processing plant and the shipping of liquefied natural gas to markets that include the United States.

“Snoehvit is a pioneering project,” said Lund. “It is Europe’s first and the world’s most northern LNG plant. It gives Statoil access to the U.S. gas market and it opens up the Barents Sea as a new oil and gas province.” The Snoehvit field is in the Barents Sea about 130 kilometers (80 miles) northwest of Norway’s northern tip.

Statoil, founded in 1972, is 82-percent government-owned and has more than 19,000 workers in 28 countries. It is based in the western Norway city of Stavanger.

—The Associated Press